SIFMA supported an appeal against an SEC administrative determination that a registered investment adviser committed fraud by making material misrepresentations and omissions in connection with a real estate transaction. The initial SEC Order required the respondents to (i) cease and desist from further violations of the securities laws, (ii) be barred from associating with any investment adviser, and (iii) disgorge $403,500 plus prejudgment interest.
The appeal presented to the U.S. Court of Appeals for the D.C. Circuit hinges on whether the SEC's imposition of sanctions is barred by the statute of limitations (28 U.S.C. § 2462), which forbids the SEC from bringing enforcement actions involving "any civil fine, penalty, or forfeiture, pecuniary or otherwise" within five years from the date on which the claim first accrued. In the underlying proceeding, the SEC acknowledged the "undisputed" fact that "this proceeding was not brought within five years of the violations." Nevertheless, the SEC argued, Section 2462 did not prevent the SEC from imposing sanctions that it characterized as "equitable" and "remedial."
In its amicus brief, SIFMA argues that the statute of limitations applies in this case because the sanctions adopted by the SEC "go[] beyond remedying the damage caused to the harmed parties" and for that reason are punitive. The issue presented, therefore, is whether the remedies imposed by the SEC are "equitable," as the SEC characterize them, or instead are "punitive," as SIFMA argues. In the brief, SIFMA states: "[i]t is the effect of sanctions on respondents, not the label attached to the sanctions by a government enforcer, that determines whether Section 2462's time limit applies."
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